With passage of the Cares Act, agencies have options for relief

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T0406TRUMPCARESACT_HR
President Trump signs the Cares Act into law in the Oval Office.

Amid juggling Covid-19-related cancellations and rebookings, travel agencies have been trying to understand what financial relief options are open to them and their advisors following the March 27 passage of the $2 trillion Coronavirus Relief and Economic Security Act (Cares).

The Cares Act introduced several new funding sources for agencies of all sizes in addition to the preexisting Small Business Administration (SBA) Economic Injury Disaster Loans. 

As of April 1, some unknowns remain about the provisions of the Cares Act, but many agencies were expressing hope that additional financial assistance would offer a shot in the arm for surviving the coronavirus crisis.

“Whatever [aid] is out there, we’re going to try for,” said Dave Hershberger, ASTA’s chair and president of Prestige Travel Leaders in Cincinnati. “I don’t think this is a short-term thing. This is going to take a while. But I think if you position yourself and you’re proactive, when we come out on the other side, the agencies and the advisors that have done these steps will be as strong or stronger than ever before.

“Whether that’s in three months, six months, a year, I don’t know,” Hershberger added. “But I think it’s really important not to sit back and wait to see what happens. Hope is not an action plan. You need to take steps.”

Available aid

Under the Cares Act and outside it, there are several types of aid available:

• SBA Economic Injury Disaster Loans: These loans of up to $2 million existed prior to the Cares Act. They are open to small businesses with fewer than 500 employees, including independent contractors (ICs) and the self-employed. The interest rate for for-profit businesses is 3.75%. Small-business owners in all U.S. states and territories are eligible to apply for the loan, based on impacts from coronavirus.

Additionally, small-business owners can apply for a loan advance of up to $10,000. According to lawyer Mark Pestronk, Travel Weekly’s Legal Briefs columnist, that loan advance does not need to be repaid, even if the loan application is denied. The funds can be used to cover business expenses like payroll, rent and utilities.

• SBA Paycheck Protection Program: This program was introduced under the Cares Act and is funded with $349 billion. It is open to any business with 500 employees or fewer, including ICs and the self-employed. The SBA said the program is designed for small businesses to keep workers employed. The maximum loan amount is $10 million, and loan forgiveness is possible if the funds are used for payroll costs and other business expenses. The program was expected to roll out on April 3. Funds will be made available through SBA-approved loan institutions.

• Emergency Stabilization Fund: Under this program, the Treasury Department will administer $500 billion in loans and loan guarantees in conjunction with the Federal Reserve. According to ASTA, this fund is designed for companies with 500 or more employees. Of that $500 billion, some $25 billion is specifically set aside for airlines and “ticket agents,” meaning travel agencies. ASTA president and CEO Zane Kerby said on April 1 that more guidance about this program was expected.

• Unemployment benefits for ICs: The Cares Act declared that the self-employed are now eligible for unemployment benefits. In the travel industry, that is largely applicable to ICs. This benefit will be administered through individual states’ unemployment benefits agencies. ASTA is compiling member resources for how to apply.

• Other related state-level programs: For example, Prestige Travel Leaders cut its 15 W-2 employees’ work time by 50% but enrolled in SharedWork Ohio, a program that enables those employees to get a portion of their reduced salary back in the form of unemployment, Hershberger said. Some other states have similar programs.

What ICs should do

Kerby encouraged ICs to file for unemployment as soon as possible.

“That might be the single biggest program, at least in the short term, that will save and replace income for our members,” he said.

To qualify, ICs only need to certify they have been adversely impacted by the coronavirus but otherwise would have been able to work as usual, ASTA general counsel Peter Lobasso said during a March 30 webinar. Payment is based on the IC’s net income for 2019, and there’s an additional $600 per week for up to four months from the Cares Act.

Pestronk concurred about applying for unemployment immediately. He also encouraged ICs to apply for an Economic Injury Disaster Loan from the SBA at the same time.

What small and midsize agencies should do

Agencies with fewer than 500 employees that are experiencing financial distress should apply for both SBA programs, Kerby advised.

“Get in line right now, because there will be heavy demand, obviously,” he said.

Many agencies have already begun that process, including Prestige Travel Leaders and VIP Vacations in Bethlehem, Pa. While the SBA has not stipulated a timeline for getting an approval or denial, both agencies applied for Economic Injury Disaster Loans and have already been notified they can request the advance of $10,000 from the SBA.

Jennifer Doncsecz, president of VIP Vacations, said that for many agencies, $10,000 isn’t much but it's “better than nothing.” She encouraged agencies to apply for an Economic Injury Disaster Loan quickly, as she has concerns the funds could dry up.

Pestronk agreed that agencies should apply for Economic Injury Disaster Loans quickly.

While both SBA programs are available to small businesses, Pestronk said the Paycheck Protection Program is likely more beneficial, as it is forgivable, at least in part.

Sandra Lipkowitz, founder and owner of We Make Travel Easy in San Francisco, a Gifted Travel Network affiliate, said she has applied for an Economic Injury Disaster Loan and has requested the $10,000 loan advance. She has one full-time employee and three part-time ICs, so she will also apply for the Paycheck Protection Program.

“Since I don’t know what will be approved, I am spreading my net as wide as I can,” she said.

Lobasso confirmed that agencies can apply for both SBA programs, but the funds must be used for different purposes. For example, if the Economic Injury Disaster Loan is used for payroll for some employees in April, the Paycheck Protection Program funds can’t be used for payroll in April for those same employees.

What large agencies should do

The Economic Stabilization Fund is designed for companies with more than 500 employees, ASTA said. On April 1, Kerby said the Society expected further details on the program within the next week and encouraged large agencies to stand by.

While the Cares Act’s $25 billion for airlines also includes “ticket agents,” Pestronk said he believes there are several stipulations that will make it difficult for travel agencies to qualify for the funds; specifically, one that states credit must not be reasonably available and another that suggests collateral is required in order to qualify for a loan or loan guarantee. 

“For ASTA, there’s a lot of work to be done to squeeze into this program for large agencies,” Pestronk said, but he also said he believes it is possible.

Kerby agreed that travel agencies are very different businesses than publicly traded airlines, so the Society has reached out to the Department of the Treasury with an offer to help the department as it sets guidelines. 

“They have acknowledged our offer, and we’re going to see how we can work with them to make sure that the rules are fair for our largest members,” he said.

More relief on the horizon

On a March 30 webinar, ASTA’s Eben Peck, executive vice president for advocacy, said there is already talk of another relief bill down the road.

“Not sure when, not sure how big, but folks are gearing up for the next round,” he said. “We are certainly going to be heavily engaged in that, as well.”

Kerby said he believes ASTA’s biggest advocacy efforts are ahead of it, as the pandemic and the government’s effective shutdown of the travel industry play out.

“We understand that this is an effort to save lives and slow the infection rate. I get it,” he said. “But thousands of businesses in our industry shouldn’t be given an ‘aw-shucks’ from their government or let the market sort it out. We have to convince the government that more measures are needed in order to get us back on our feet.”

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